When the iPhone was launched in 2007, I met with Phil Schiller, SVP of World Wide marketing for Apple, and Greg Joswiak, the Apple VP in charge of marketing the iPods and iPhones. During the meeting they showed me the iPhone's many features and shared their goals for the device, which has now become a major business for Apple.

During that meeting, they made a comment that I believe is really the heart of Apple's secret sauce and the cornerstone of how it continues to outsmart its competitors. They laid the iPhone on the table, with it turned off, and asked me what I saw. I told them I saw a 3.5 inch blank screen. They said that from Apples point of view, the "magic" of the iPhone is strictly in the software. And, they de-emphasized the hardware.

Yes, the iPhone was a slick smartphone with a great screen and, at the time, it broke new ground in smartphone design, and Apple was very proud of that. However, with the iPhone turned off, it had very little value. But once it was turned on, the iPhone's OS and apps turned it into a completely different device. While it was a phone, the software made it much more—it became a vehicle for applications. It also had another component that really made it sing and dance; it was also an iPod and was tied directly to iTunes. Now it morphed into a much broader multi-purpose device. It was a phone, a vehicle for apps, and an iPod, which made it a great personal mobile entertainment system.